Government is to make an upfront payment of GHȼ250 million as part of the Legacy Debt owed by the Volta River Authority (VRA) to some commercial banks in the country.

According to the Ministry of Finance, government has arranged with the Bank of Ghana to create an escrow account to transfer 250 million cedis to settle part of the debts owed to 12 banks in the country.

VRA indebtedness to the commercial banks in the country as of May 16, 2016 stood at GHȼ776.6 million and $358 million.

The Minister of Finance, Seth Terkper who announced this at a meeting with the Ghana Association of Bankers (GAB), said the payment formed part of measures by the government to address the Energy Sector Legacy Debts by the Volta River Authority (VRA) and the Tema Oil Refinery (TOR) and those owed to the Bulk Distribution Companies (BDCs).

He explained that the GHȼ250 million would be funded through the Energy Sector Levy instituted by the government.

Mr. Terkper, who has oversight responsibility over the Ministry of Power, observed that the objective of government was to settle all the energy legacy debts owed by VRA and TOR to the banks and BDCs in the country, adding that “this will include improving the repayment of the legacy debt to ECG in the amount of GHȼ728 million over five years”.

The minister said the government had reached a landmark agreement with the commercial banks in addressing the energy sector legacy debt.

Among the agreements, Mr. Terkper mentioned the reduction of rate on the foreign currency component of the VRA debt from an average of 11 to 8.50 per cent and the reduction of interest on the cedi component of the VRA debt from an average of 30 to 22 per cent.

“Proceeds of the energy debt recovery levy which are applied to the VRA debt will be converted into equity on VRA’s balance sheet or could be subject to an on-lending arrangement with the government,” he said, adding that “government will place limits on the ability of the VRA to incur new indebtedness without express approval”.

On the TOR debt which stands at GHȼ917 million as of June 30, 2016, Mr. Terkper said the government was in the process of paying the debt with proceeds from the Energy Debt Recovery Levy.

He said TOR was investing an amount of GHȼ150 million through a ten-year bond, which would help the company to resettle its debt.

Touching on the debt owed to the BDC which stands at $449.67 million which was incurred as loss claims for transactions initiated within the period of July 1, 2011 to December 31, 2013, Mr. Terkper said efforts were being made to clear the debt.

The Minister of Finance entreated VRA and TOR to invest in bulk storage facilities so that they could still get access to gas and crude oil for processing in periods of a cut in the supply of those products.

Mr. Terkper said the government was working assiduously to improve the financial position of VRA and TOR so that they could borrow on their own balance sheet as Cocobod was doing to finance their operations.

The First Deputy Governor of the Bank of Ghana (BOG), Mr. Millison Narh in his remark said the BoG commissioned four companies to ascertain the losses made by the BDC.

The President of the GAB and Managing Director of Stanbic Bank, Alhassan Andani said his outfit was excited about the efforts being made by government to settle the energy sector legacy debts.